FINANCIALS LEAD INDEX BREAKOUTS -- 9,000 DOW LIKELY, S&P 500 TARGET TO 950

NASDAQ HITS THREE-MONTH HIGH... Stock indexes achieved upside breakouts all over the place today. The Nasdaq Composite Index finally broke through the top of its month-long trading range to achieve a three-month high. The Semiconductor (SOX) confirmed that positive move with an upside breakout of its own. The SOX is now approaching a challenge of its January high. Internet stocks were also quite strong today.

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ALL THREE S&P INDEXES ARE ABOVE 200-DAY LINES... The next three charts show that the rally is broadening out. The S&P 500 Large Cap Index broke out to a three-month high. The index of large cap stocks exceeded its 200-day moving average a week ago. In today's trading, the S&P 400 Mid Cap Index and the S&P 600 Small Cap Index both cleared their 200-day moving averages as well. That's a pretty good sign of broad participation in the market's rally and increases the odds for more to come.

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FINANCIAL LEADERSHIP... Another good sign for the market is continuing leadership by financial stocks, which were the day's top performing sector. The AMEX Financials Select Sector SPDR jumped to another three-month high. The rising relative strength line along the bottom shows the financial index outperforming the S&P 500 since the start of April. The RS has already exceeded its January high. While banks and brokers closed strong, insurance stocks were the day's leaders.

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INSURANCE LEADERS... All three insurance stocks shown here had strong percentage price gains on very strong volume. Ace Ltd. registered the highest price in over four months -- on strong volume. Aon broke through its October high to reach the highest level in nine months. XI Capital achieved a bullish break and is trading at a ten-month high. The volume was the highest since last summer. Very impressive.

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JPM AND MRK LEAD DOW... JP Morgan was the Dow's top percentage gainer today. The big bank stock has finally exceeded its January high to achieve an upside breakout. Its rising relative strength line (vs. the Dow) also broke out. It's always good to see financial stocks leading. Drugs also had another strong day. Merck jumped to a three-month high on strong volume and is nearing a challenge of resistance near 60.

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DOW HEADED TO 9,000... Although it didn't achieve an upside breakout today, we believe the Dow will do so shortly. [Its recent pattern looks like an "ascending triangle", which is normally bullish]. That will put the Dow on its way to the top of its nine-month trading range near 9,000. That would put the S&P 500 near 950. Today's strong action makes those upside targets a lot more likely.

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